DXY: Markets anticipate hot inflation – Scotiabank
20.02.2025, 13:15

DXY: Markets anticipate hot inflation – Scotiabank

The general US Dollar (USD) rebound that has developed over the course of this week is showing signs of stumbling, Scotiabank's Chief FX Strategist Shaun Osborne notes.

USD drifts lower as tariff volatility eases

"There is not an evident theme behind the USD dip. However, tariff volatility in the markets generally is subsiding and there are perhaps signs that the 'US exceptionalism' mood that developed around the president’s election win is fading somewhat. US stocks are up 4-5% in YTD terms but European markets—which are clearly facing some growth challenges—are up significantly more (Dax +13%, CAC +10.6% YTD)."

"DXY losses below 107 overnight tip near-term technical risks towards a bit more softness at least and perhaps a retest of last Friday’s low around 106.5. Yesterday’s FOMC minutes reflected the cautious tone of recent comments from top policymakers. The minutes noted that officials wanted more progress on inflation before adjusting rates while uncertainty warranted caution. They also noted trade and immigration policy might hinder disinflation. Swaps suggest the Fed will remain on hold until September when the first full 1/4 point cut is priced into contracts."

"US weekly claims data drop at 8.30ET along with the Philly Fed survey. US Leading Indicators are out at 10ET. The Fed’s Goolsbee, Musalem, Barr and Kugler (all voters this year) are speaking over the course of the day. RBA Governor Bullock delivers her parliamentary testimony at 17.30 ET. Remarks are likely to reflect her cautious comments on the policy outlook that followed the central bank’s first rate cut in four years this week."

 

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